By: Peter Carr EROAD Director, Regulatory Market Development ANZ
The announcements from South Australia and Victoria of ‘special’ road use taxes for light electric vehicles (EVs) represent an important step forward for road funding in Australia. But with the sobriquet ‘special’ comes concern that the charges might be unusual and arbitrary. How real are these concerns?
Clearly the charges are new mechanisms, but are the charges themselves new? If you take the view that EVs were paying nothing before and now have to pay something, then the answer is still ‘yes’.
But if you take the view that cars have paid for as long as there have been fuel excises, sales tax and registration fees, and the EV charges mean a subset of car owners will continue to be charged for their road use, then the answer is ‘no’.
But the public policy problem is not whether this is a ‘yes or no’ question. The public policy problem is that the answer can only be a firm ‘no’ – EV owners and advocates claims can only be strongly refuted – if fuel excises are genuinely road usage charges. For this to be the case three important criteria need to be satisfied:
- The level of the charge needs to be in some reasonable proportion to the costs imposed by the class of payer
- The revenue gathered needs to be in reasonable proportion to the level of expenditure needed to address those costs
- Payers need to be able to see the connection between the costs they impose, charges paid, and service levels delivered.
Right now, for light vehicle owners at least, none of these criteria are well satisfied. The major saving grace is that the proposed rates aim to replicate the average charges incurred by drivers of internal combustion engine vehicles (ICEs) – so the charges on EVs will be in some general way in proportion to the charges on ICEs.
So, in conclusion, while the mechanism is new, and the rate is arbitrary relative to the true costs incurred through light vehicle road use, the charge on EVs still represents a continuation of a pre-existing policy of charging car owners something for their road use. That doesn’t go al the way towards a fairer share of costs falling on light vehicles, but it’s not something to be thrown away, either, by letting EVs off the hook entirely.
About the author
Peter Carr is the Director Regulatory Market Development with EROAD Ltd, responsible for working with government policy agencies and regulators across Australia and New Zealand on road safety, funding and taxation matters. Prior to joining EROAD, Peter was responsible for advising the New Zealand government on: the operation and performance of the land transport revenue, funding and investment systems; the rates of Road User Charges and Fuel Excise Duty; the use of tolling, debt and public-private partnerships; and the regulatory settings for heavy vehicle dimensions, mass, and access.